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In consolidation of stamnt of proft or loss when there is an intra group (from parent to subsiadry) transfer of non current asset at gain to selle, what will be the adjusting double entries?
Dr Seller’s retained earnings
Cr TNCAWith the NET pup
The seller will have recognised the profit on the sale
The buyer will be charging depreciation on the transfer value that includes the profit – so charging too much depreciation so far as the group is concerned
So reduce seller’s retained earnings by the profit on sale, but then increasecseller’s retained earnings by the value of the extra depreciation that has been charged on the profit element
Have you watched the lectures / read through the course notes? It’s all explained in there
The NET pup will add on to cost of sales
(I assume that depreciation has already been charged calculated on the assets held by the two companies in the question)
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